Fitch: Significant Erosion in Power Plant Valuations

NEW YORK--()--Power plant valuations have declined significantly over the last five years as pressures on competitive power markets have continued unabated, according to a new Fitch Ratings special report.

A precipitous drop followed by a fundamental shift in the long-term outlook for natural gas prices has been a major driver of the decline in power plant valuations. Power demand has also been soft, driven by depressed economic activity and, more recently, by conservation and energy efficiency initiatives. Supply glut in certain markets, shifting coal-natural gas spread, tightening environmental regulations, and the lack of clarity on rules governing resource adequacy are also contributing factors.

Fitch Ratings' analysis for a specific sample of power plants indicates that the decline in values for power plants over the last five years varies by asset. Fuel, location, vintage, efficiency, and compliance with environmental regulations are some of the notable distinguishing factors. For the sample that Fitch observed, the decline in plant valuations is the most severe for coal-fired power plants with a 55% decline in median valuations. Fitch believes this is driven by shrinking dark spreads across most regions and additional capital and operating costs imposed by stringent EPA regulations. Natural gas-fired power plants have been affected the least with some plants even appreciating in value over the observed time period.

The report, 'The Erosion in Power Plant Valuations', addresses the trend in power plant valuations owned by several investor owned competitive generation companies over the last five years.

The full report is available on Fitch's website at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: The Erosion in Power Plant Valuations

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718806

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Contacts

Fitch Ratings
Shalini Mahajan, CFA, +1-212-908-0351
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings
Shalini Mahajan, CFA, +1-212-908-0351
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
brian.bertsch@fitchratings.com